Caveolins-1 and -2 are normally co-expressed, and they form a hetero-oligomeric complex in many cell types. These caveolin hetero-oligomers are thought to represent the assembly units that drive caveolae formation in vivo. However, the functional significance of the interaction between caveolins-1 and -2 remains unknown. Here, we show that caveolin-1 co-expression is required for the transport of caveolin-2 from the Golgi complex to the plasma membrane. We identified a human erythroleukemic cell line, K562, that expresses caveolin-2 but fails to express detectable levels of caveolin-1. This allowed us to stringently assess the effects of recombinant caveolin-1 expression on the behavior of endogenous caveolin-2. We show that expression of caveolin-1 in K562 cells is sufficient to reconstitute the de novo formation of caveolae in these cells. In addition, recombinant expression of caveolin-1 allows caveolin-2 to form high molecular mass oligomers that are targeted to caveolae-enriched membrane fractions. In striking contrast, in the absence of caveolin-1 expression, caveolin-2 forms low molecular mass oligomers that are retained at the level of the Golgi complex. Interestingly, we also show that expression of caveolin-1 in K562 cells dramatically up-regulates the expression of endogenous caveolin-2. Northern blot analysis reveals that caveolin-2 mRNA levels remain constant under these conditions, suggesting that the expression of caveolin-1 stabilizes the caveolin-2 protein. Conversely, transient expression of caveolin-2 in CHO cells is sufficient to up-regulate endogenous caveolin-1 expression. Thus, the formation of a hetero-oligomeric complex between caveolins-1 and -2 stabilizes the caveolin-2 protein product and allows caveolin-2 to be transported from the Golgi complex to the plasma membrane.